Dr. Joel C. Yu, Chief Regulator of the Metropolitan Waterworks and Sewerage System (MWSS) Regulatory Office, was the speaker in the recently concluded 14th session of the Asian Development Bank (ADB) Water Sector Group’s Distinguished Water Leaders Series which highlights speeches and lectures by eminent persons in the water sector.
“It is a venue for me to share my thoughts and take-aways in the past three years as the Chief Regulator of the MWSS. I analyzed the events during a challenging episode in the story of the privatization of the MWSS in a way a professor would discuss a business case in an MBA class at the UP Virata School of Business,” said Dr. Yu as he presents “Metro Manila’s Water PPP: Take-aways of a Regulator” during the forum held on 11 July 2017 at the ADB’s Main Library in Mandaluyong City.
In the beginning of his presentation, Dr. Yu established that the head of an organization shapes its character. He applauded MWSS leaders Architect Gerardo A.I. Esquivel and Atty. Emmanuel L. Caparas, individuals of competence and integrity but above all Filipinos with deep sense of patriotism, all of which Dr. Yu identified as the key attributes of a leader.
Take-aways of a Regulator
Dr. Yu identified three notions as his take-aways in performing his role as a Regulator: Incomplete Contracts, Social Optimum and Maximum Shareholder Value, and Asymmetric Information.
First Take-away: Notion of Incomplete Contract
According to Dr. Yu, an incomplete contract refers to an agreement that has gaps, missing provisions, and ambiguities. It may be completed by renegotiation or by courts. In cognizance of the possible gaps and ambiguities in the Concession Agreement, Dr. Yu identified provisions in the Concession Agreement which were incorporated by its framers to address these gaps and ambiguities.
Second Take-away: Notions of Social Optimum and Maximum Shareholder Value
Public-Private Partnership is created to deliver a common purpose; yet the partners have different goals. The public sector is oriented towards the attainment of a social optimum that ensures efficient allocation of resources while keeping equity goals in check; In contrast, the private sector is oriented towards the maximizing shareholder value. Dr. Yu highlights the importance of a Regulator with technical expertise to ensure that the private sector’s pursuit to maximize shareholder value is not achieved at the expense of the customers. For Dr. Yu, integrity and patriotism are just as important in the conduct of Regulation.
Third Take-away: Notion of Asymmetric Information
Dr. Yu explained that there is asymmetric information when a party in a transaction has information that the counterparty does not have access to. He observed that asymmetric information is relevant when standard government interventions such as regulation of monopolies to replicate a competitive environment are not sufficient to restore optimality
Need for a Strong Regulatory Office
Dr. Yu emphasized the need for a strong Regulatory Office which can be achieved through institutionalizing guidelines in the conduct of its regulatory determinations and through the support of other institutions like the ADB.
In conclusion, Dr. Yu shared, “In 2014, when I assumed as the Chief Regulator of the MWSS, Jean Tirole, a French economics professor, won the Nobel Prize for Economics for his work on market power and regulation, and his work on taming powerful firms. Talking about his award, he said, “It’s also being with the right people, in the right place, at the right moment. And, you know, it’s team work too.”
The forum was attended by former MWSS Chairman and Administrator Gerardo A.I. Esquivel, MWSS Regulatory Office Deputy Administrators Patrick Lester N. Ty, Evelyn B. Agustin, Claudine B. Orocio-Isorena, MWSS Regulatory Office Technical Regulation Area officers Darren D.B. Fernandez, Jose Noel O. Dalistan and Joel A. Dominguez, MWSS Regulatory Office Public Information Department’s Kristin C. San Pedro and Lorna C. Medina. ADB was represented by Ramesh Subramaniam, Director General of the Southeast Asia Department, Stella Tansengco-Schapero, Senior Finance Specialist of the Southeast Asia Department, Ellen Pascua, Sustainable Development and Climate Change Department Consultant. Also present in the forum were officials from ADB, PPP Center, NEDA, and the MWSS Concessionaires, and students of the University of the Philippines.